Natural Gas Futures Fluctuate Before Report on U.S. Stockpiles

June 5 (Bloomberg) -- Natural gas futures fluctuated in New York before a weekly report that may show a larger-than-average stockpile increase.

Gas moved between gains and losses as government data scheduled for release tomorrow in Washington may show that inventories rose 99 billion cubic feet in the seven days ended May 31, according to the median of 17 analyst estimates compiled by Bloomberg. The five-year average gain for the week is 92 billion. Supplies rose 63 billion the same week last year.

"This could be the biggest storage injection for a while," said Phil Flynn, a senior market analyst for Price Futures Group in Chicago. "If we see a number in the triple digits, that’s going to put a negative spin on the market."

Natural gas for July delivery fell 0.3 cent to $3.995 per million British thermal units at 1:59 p.m. on the New York Mercantile Exchange. Trading volume was 51 percent below the 100-day average for the time of day. The futures have gained 19 percent this year.

The discount of July to October futures narrowed 0.2 cent to 2.1 cents.

July $4.25 calls were the most active options in electronic trading. They were up 0.4 cent to 3.6 cents per million Btu on volume of 969 lots at 2:18 p.m. Calls accounted for 60 percent of trading volume. Implied volatility for at-the-money options expiring in July was 29.85 percent at 2:15 p.m., up from 28.56 percent yesterday.

"Market participants continue to look for a new signal for guidance for the next directional move," said Dominick Chirichella, senior partner at the Energy Management Institute in New York, in a note to clients today. "The spot futures contract has been stalled in the $3.90 to $4.16/mmbtu trading range for most of the month of May and early June."

Stockpile Report

Gas inventories totaled 2.141 trillion cubic feet in the week ended May 24, 3.9 percent below the five-year average and 23.7 percent below last year’s level for the period, the Energy Information Administration said in last week’s supply report. Tomorrow’s report is scheduled for release at 10:30 a.m. in Washington.

MDA Weather Services in Gaithersburg, Maryland, said temperatures would be lower-than-average in the Northeast through June 14.

The high in New York on June 13 may be 69 degrees Fahrenheit (21 Celsius), 10 less than usual, according to AccuWeather Inc. The high in Philadelphia on June 13 may be 73 degrees Fahrenheit, 9 below normal. Power generation accounts for 33 percent of U.S. gas demand, according to the EIA, the Energy Department’s statistical arm.

Gulf Storm

An area of low pressure over the Gulf of Mexico has a 60 percent chance of becoming a tropical cyclone within the next 48 hours, according to the National Hurricane Center. The rain and clouds associated with the system may lower temperatures enough to decrease daytime energy demand on the East Coast, Matt Rogers, president of Commodity Weather Group LLC in Bethesda, Maryland, said in a forecast today.

U.S. gas output will rise to an all-time high for the sixth straight year as new wells come online at shale formations, such as the Marcellus in the Northeast, the EIA said May 7 in its monthly Short-Term Energy Outlook. Marketed gas production will average a record 69.9 billion cubic feet a day this year, up from 69.18 billion a day in 2012, the agency said.

--Editors: Bill Banker, Richard Stubbe

To contact the reporter on this story: Christine Buurma in New York at cbuurma1@bloomberg.net;

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net